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IGD: online set to be fastest growing Asia channel with 194% growth predicted by 2022

Date : 16 August 2018

Asia’s online grocery channel is set to grow by $176bn (194%) to 2022, making it the fastest growing channel in Asia, according to new figures from international research organisation IGD. The research, the first deep dive into the region’s online channel from IGD, forecasts that the online channel will account for 6.9% of total grocery retail sales in Asia by 2022, more than doubling its current market share of 3.2%.

The new research anticipates grocery ecommerce sales across Asia’s top 12 grocery markets will grow to $267bn from the current value of $91bn. This represents an annual growth rate of 24.1% to 2022, compared to the overall grocery retail market annual growth rate of 6.4% over the same period.

Shirley Zhu, Programme Director at IGD, said: “The penetration, size and growth of online grocery varies greatly by country. South Korea, China and Japan are leading the way in online grocery shopping and will see the highest sales contribution from grocery ecommerce, while continuing to lead the development in the region.”

“Singapore and Taiwan will also have well developed online grocery channels by 2022, benefiting from existing infrastructure and retailer investment, while in Southeast Asian markets grocery ecommerce, although growing rapidly, is still in its infancy. Logistics and payment will be the key barriers to overcome for India and most Southeast Asian countries. Although these markets are expected to have the fastest growth, the market share of online grocery will remain small.”

Top online grocery markets in Asia by 2022

Source: IGD Asia research

Despite South Korea maintaining a higher online grocery market share in 2022, China will strengthen its position as Asia’s largest online grocery market, with sales set to reach $185bn. With well developed online grocery operations already, Japan and South Korea will see online grocery market shares increase, but growth will be relatively slow compared to other markets in the region. From a very low base, online grocery sales in India and Indonesia are forecast to grow rapidly over the next five years due to a combination of retailer investment, a large population and improving infrastructure.

With a solid foundation of online grocery retail already established, Taiwan and Singapore will remain important markets to watch. Across Southeast Asia IGD’s research anticipates rapid growth over the next five years, although the market share of online grocery will remain <2% in all markets. The Philippines and Vietnam are expected to have the fastest growth, with retailers starting to experiment.

On China, Shirley Zhu said: “The acceleration of online and offline integration has been accentuated by partnerships between ecommerce players and bricks and mortar retailers. Physical retailers in China, having recognised the importance of the online and digital channel, are collaborating with ecommerce and delivery partners to offer more targeted ranges, promotions and expanding their omnichannel presence.”

On Japan, Shirley Zhu said: “Retailers are seeking better ways to integrate their physical store networks with online operators, for example 7-Eleven Japan has launched a smartphone ordering service, Net Konbini. Convenience store operators are also using the online channels to fulfil meal solution orders, and we’re seeing retailers collaborating on online solutions to combat the country’s ageing population, such as Seiyu (Walmart) and Rakuten.”

On South Korea, Shirley Zhu said: “South Korea has the highest online grocery penetration in Asia due to the rising number of smaller households, widespread high-speed internet access and high consumer confidence in making online payments. The market has strong pureplay online retailers, such as Gmarket, 11Street and Coupang, which are all enhancing their food and grocery service. Leading bricks and mortar retailers are stepping up their investment in online as well.”

On India, Shirley Zhu said: “With millions of internet users and growing smartphone penetration, ecommerce shows tremendous growth potential and major players are ramping up their online grocery plans. Amazon sells groceries via Amazon Pantry, and this year introduced Amazon Prime alongside plans to invest in a wholly-owned grocery subsidiary. Walmart also recently bought 77% of Flipkart, India’s leading marketplace, with plans to strengthen its grocery offering. Alibaba has invested in BigBasket, a key online grocer. Major retailers, as well as pureplay operators, like Grofers, are also increasing investment in the channel.”

On Indonesia, Shirley Zhu said: “Ecommerce is forecast to grow significantly as international companies recognise the opportunities. Alibaba has made bold moves by increasing its range and presence through Lazada, as well as investing in Tokopedia, a leading online marketplace. Non-traditional grocery players are also entering this market. Ride hailing companies Go-Jek and Grab both offer online grocery shopping services that are quickly gaining popularity.”

On Taiwan, Shirley Zhu said: “Bricks and mortar retailers used to run their online operations through shopping platforms such as Yahoo, PChome and Rakuten, for logistical support and as a means of managing costs. They are now well-placed to launch their own ecommerce solutions. The introduction of mobile payment services has been relatively slow despite high smartphone penetration. Many consumers still prefer to purchase online and collect and pay in cash at convenience stores, bypassing any concerns regarding online payment security. Alternative solutions to cash will help eliminate this barrier.”

On Singapore, Shirley Zhu said: “Online grocery shopping is growing in popularity due to the extra value that it offers to shoppers. Retailers have formed partnerships to encourage ecommerce growth. RedMart is the market leading online grocery retailer and has teamed up with companies such as Netflix, Lazada and Taobao to provide shoppers with exclusive offers via its LiveUp loyalty program. FairPrice has also partnered with Grab, a ride sharing platform, to introduce a subscription initiative called SCORE. This gives shoppers free delivery for online orders, as well as discounted Grab rides.”

IGD is a not for profit research and training organisation. It has a trading subsidiary that provides commercial insight services for the consumer goods industry. The profits from these commercial services fund our not for profit activities.

IGD Asia is the trading name for our Singapore based trading entity. IGD’s group structure is here

Download a free version of IGD’s five-year forecasts for online grocery in Asia: asia.igd.com